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Dollar Gains Stall Despite Strong Jobs Report
Confirmed
In Short: Despite a stronger-than-expected US jobs report, the US Dollar failed to sustain gains, with markets pricing a significant chance of further Federal Reserve tightening by December.
MUFG’s Lloyd Chan noted that the Dollar strengthened after a better-than-expected August US jobs report, with Nonfarm Payrolls and labour participation surprising to the upside while wage growth eased. However, the DXY remains little changed since Fed Chair Warsh’s Jackson Hole speech, suggesting investors are not yet convinced of a sustained Dollar rally.
Markets now price a significant chance of further Federal Reserve tightening by December, but the DXY remains little changed since Fed Chair Warsh’s Jackson Hole speech, suggesting investors are not yet convinced of a sustained Dollar rally. The US Dollar faces headwinds from US debt worries and uncertainty about the Fed's policy outlook ahead of Friday's US CPI data release.
The US Dollar Index (DXY), which tracks the greenback’s value against a basket of six major currencies, trades around 99.10 after climbing as high as 99.36 following the employment report. Meanwhile, the US Dollar-Swiss franc saw strong rallies stall out with the benchmark pair registering modest gains of over 0.30%.
The Mexican Peso appreciated against the US Dollar, testing two-year highs near 16.85 as the USD/MXN set aside a strong US Nonfarm Payrolls report, which was ignored by the Peso’s bears. The US Dollar-Swiss franc saw strong rallies stall out with the benchmark pair registering modest gains of over 0.30% as the greenback was boosted by a solid US non-farm payrolls report, pushing the pair above the 50-day Simple Moving Average (SMA) to reach a daily high of 0.8126.
What's confirmed
What's still developing
- Nonfarm payrolls rose by 162k in August, well above consensus expectations of 55k, while July employment was revised higher to a gain of 21k from an initially reported decline.
- Meanwhile, the upbeat US NFP report lifted Fed rate hike bets, which, along with escalating US-Iran tensions, underpins the safe-haven US Dollar and caps the currency pair.
- Meanwhile, the euro-dollar saw sharp two-way price swings on Friday after the stronger-than-expected US jobs report triggered fresh volatility.
- The EURUSD pair initially fell to an intraday low of 1.1585 before recovering as the dollar struggled to sustain its gains.
- A round up of the latest Pound Dollar forecast news items from the Currency News desk.